OIG Audit Report - Debarment Authority Should Be Used More Extensively  in Foreign Labor Certification
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OIG Audit Report - Debarment Authority Should Be Used More Extensively in Foreign Labor Certification

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EMPLOYMENT AND TRAINING ADMINISTRATION AND WAGE AND HOUR DIVISION DEBARMENT AUTHORITY SHOULD BE USED MORE EXTENSIVELY IN FOREIGN LABOR CERTIFICATION PROGRAMS Date Issued: September 30, 2010 Report Number: 05-10-002-03-321 Office of Inspector General—Office of Audit U.S. Department of Labor September 2010 Office of Inspector General Office of Audit DEBARMENT AUTHORITY SHOULD BE USED MORE EXTENSIVELY IN FOREIGN LABOR CERTIFICATION PROGRAMS BRIEFLY… WHAT OIG FOUND Highlights of Report Number 05-10-002-03-321, to OFLC and WHD narrowly defined their suspension the Assistant Secretary for Employment and and debarment authority based only on INA Training Administration (ETA) and the Deputy provisions, rather than the broader government-Administrator for Wage and Hour Division (WHD). wide authority (29 CFR Part 98). As a result, they did not consider debarring individuals or entities WHY READ THE REPORT convicted of program violations resulting from OIG This report discusses the U.S. Department of investigations. Labor’s (DOL) use of suspension and debarment authority within the foreign labor certification (FLC) When OFLC and WHD did debar individuals or programs. Suspension and debarment are used to entities, they did not provide that information for assure that the government does business with inclusion in the ...

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EMPLOYMENT ANDTRAINING ADMINISTRATION AND WAGE ANDHOURDIVISION
EBARMENT UTHORITY OHLU DE 
D A S B USEDMOREEXTENSIVELYIN FOREIGNLABORCETRFICIATION PROGRAMS
Date Issued: September 30, 2010  Report Number: 05-10-002-03-321
U.S. Department of Labor Office of Inspector General Office of Audit BRIEFLY… Highlights of Report Number 05-10-002-03-321, to the Assistant Secretary for Employment and Training Administration (ETA) and the Deputy Administrator for Wage and Hour Division (WHD). WHY READ THE REPORT This report discusses the U.S. Department of Labor’s (DOL) use of suspension and debarment authority within the foreign labor certification (FLC) programs. Suspension and debarment are used to assure that the government does business with only responsible parties. Suspension prohibits persons or entities from participating in government business pending the results of an agency investigation. Debarment excludes persons or entities from government business for up to 3 years for prescribed violations. The Federal government established the government-wide Excluded Parties List System as a comprehensive list of individuals and firms suspended, disqualified, or otherwise excluded from receiving business or benefits from federal agencies. In concert with the Departments of Homeland Security and State, DOL’s Office of Foreign Labor Certification (OFLC) and WHD oversee and enforce provisions of the Immigration and Nationality Act (INA) related to several visa programs that permit foreign residents to work in the United States. Violations of program requirements subject persons and entities to potential debarment from future program participation and other government business. WHY OIG CONDUCTED THE AUDIT The OIG conducted a performance audit to determine whether OFLC and WHD properly used suspension and debarment in administering the foreign labor certification programs. READ THE FULL REPORT To view the report, including the scope, methodology, and full agency response, go to: http://www.oig.dol.gov/public/reports/oa/2010/05-10-002-03-321.pdf
September 2010 DEBARMENT AUTHORITY SHOULD BE USED MORE EXTENSIVELY IN FOREIGN LABOR CERTIFICATION PROGRAMS WHAT OIG FOUND OFLC and WHD narrowly defined their suspension and debarment authority based only on INA provisions, rather than the broader government-wide authority (29 CFR Part 98). As a result, they did not consider debarring individuals or entities convicted of program violations resulting from OIG investigations. When OFLC and WHD did debar individuals or entities, they did not provide that information for inclusion in the government’s Excluded Parties List System. As a result, there was an increased risk that parties who had previously violated FLC laws or regulations could continue to participate in FLC programs, or receive business or benefits from other federal agencies. Although not related to the use of suspension and debarment authority, the audit also identified several FLC applications that contained potentially invalid Employer Identification Numbers (EIN). While the number of potentially invalid EINs was small, the review of applications for valid EINs is within OFLC’s authority to “review applications for obvious errors.” An invalid EIN may indicate that the applicant is not a legitimate organization. WHAT OIG RECOMMENDED We recommended that ETA and WHD take steps to assure that (a) debarments are considered, and decisions documented, for anyone convicted of FLC violations, and (b) FLC debarments are reported to appropriate DOL personnel for inclusion in the government-wide exclusion system. We also recommended that ETA strengthen FLC application processing controls to ensure the detection and resolution of applications with potentially invalid EINs. The Assistant Secretary for ETA cited the need to resolve differing legal opinions concerning the use of the exclusion system and stated they had implemented additional EIN controls. WHD cited a need for further legal research over both debarment authority and use of the exclusion system.
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U. S. Department of Labor – Office of Inspector General
Table of Contents
PAGE
Assistant Inspector General s Report......................................................................... 1 Results In Brief.............................................................................................................. 3
Objective — Was the Department prope rly using suspension and debarment in administering the foreign labor certification programs?................. 4 The Department did not consider debarment actions against convicted FLC violators, and did not report debarred or disqualified parties to the government’s exclusion system............................................................................4 Finding 1— The Department was not considering debarment actions against all FLC applicants convicted of violations ............................. 4 Finding 2 — The Department did not submit information on debarred or otherwise disqualified FLC applicants to designated Department personnel for inclusion on the governmentwide exclusion system..... 6 Other Issue Applications with Invalid Employee Identification Numbers .................................. 8
Recommendations ......................................................................................................... 8 Exhibit Exhibit: Expanded Criteria for Finding 1................................................... 13 Appendices Appendix A Background .............................................................................................. 17 Appendix B Objectives, Scope, Methodology, and Criteria ......................................... 19 Appendix C Acronyms and Abbreviations ................................................................... 23 Appendix D OFLC Response to Draft Report.............................................................. 25 Appendix E Acknowledgements .................................................................................. 29
Suspension and Debarment in Foreign Labor Certification Report No. 05-10-002-03-321
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Suspension and Debarment in Foreign Labor Certification Report No. 05-10-002-03-321
U. S. Department of Labor – Office of Inspector General
U.S. Department of LaborOffice of Inspector General Washington, D.C. 20210
September 30, 2010
Assistant Inspector General s Report
Jane Oates Assistant Secretary, Employment and Training Administration U.S. Department of Labor 200 Constitution Ave, NW Washington, D.C. 20210 Nancy Leppink Deputy Administrator, Wage and Hour Division U.S. Department of Labor 200 Constitution Ave, NW Washington, D.C. 20210
The Office of Inspector General (OIG), Office of Audit conducted a performance audit of the Employment and Training Administration’s (ETA) and the Wage and Hour Division’s (Wage and Hour) use of suspension and debarment authority within the Foreign Labor Certification (FLC) programs during fiscal year (FY) 2009. The Immigration and Nationality Act (INA) established several visa types that permit foreign residents to work in the United States. These include (a) Permanent (PERM), which allows an employer to hire a foreign worker to work permanently in the United States; (b) H1B, which allows an employer to temporarily employ a foreign worker in a specialty occupation requiring a bachelor’s degree or its equivalent, or as a fashion model of distinguished merit and ability; (c) H2A, which allows agricultural employers, who anticipate a shortage of domestic workers, to employ foreign workers to perform agricultural labor or services of a temporary or seasonal nature; and (d) H2B, which allows employers to hire foreign workers to perform temporary nonagricultural services or labor on a one-time, seasonal, peak load or intermittent basis. During FY 2009, Office of Foreign Labor Certification, or OFLC (Program Office), processed 321,730 labor certification applications for these visa types. It certified 309,268 (96 percent) of those applications. The Departments of Labor (Department), Homeland Security (Homeland Security), and State (State) all have oversight and approval responsibilities in these programs. Employers must first seek a labor certification” from the Department. If approved, the certification acknowledges that (a) a need for workers exists, (b) the need cannot be Suspension and Debarment in Foreign Labor Certification 1 Report No. 05-10-002-03-321
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satisfied by available U.S. workers, and (c) foreign workers will receive the prevailing wage for the defined work. The Department performs its labor certification duties through the Program Office. While the Program Office processes applications for foreign labor certification, both it and Wage and Hour exercise enforcement action against applicants who violate program rules.
The federal governmentwide suspension and debarment process is used to promote economy and efficiency in federal procurement and nonprocurement activities by ensuring the government conducts business only with responsible parties. Suspension temporarily prohibits a person or entity from participating in government contracting and other specified transactions, pending completion of an agency investigation and any ensuing judicial or administrative proceedings. Debarment excludes a person or entity from government contracting and other defined transactions for a designated period of time (up to 3 years) for prescribed violations. Neither the Program Office nor Wage and Hour suspend applications or debar FLC applicants using the governmentwide suspension and debarment process.
The Program Office debars H2B, H2A, and PERM applicants under INA regulations by notifying the applicant of the reason for the debarment, providing the applicant an opportunity to appeal the debarment decision, and finalizing the debarment1. Wage and Hour follows the same basic process for the H1B program except it notifies Homeland Security, who in turn, actually finalizes the debarment. The Program Office and Wage and Hour debarment lists showed 14 entities debarred for violations of FLC rules during FY 2009. Additional background information is contained in Appendix A.
The audit objective was to determine whether the Department properly used suspension and debarment tools in administering the foreign labor certification programs. To achieve the objective, we examined related statutes, regulations, and executive orders and reviewed draft or final suspension and debarment operating procedures, training and resource materials, and examples of case file documents. We interviewed (a) Program Office, Wage and Hour, and other Department personnel; (b) U.S. General Services Administration personnel; and (c) officials at OIG’s Office of Labor Racketeering and Fraud Investigations (OLRFI). We analyzed FY 2009 data related to FLC applications the Program Office approved, Program Office and Wage and Hour debarment actions, and entries on the governmentwide Excluded Parties List System, or EPLS (exclusion system). We compared OLRFI information to FLC data and certified application data to Internal Revenue Service (IRS) Employer Identification Number (EIN) website information.
We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our
1debarment authority with the Program Office for debarments for the H2A program.Wage and Hour has concurrent 20 CFR 655.182(g). Suspension and Debarment in Foreign Labor Certification 2 Report No. 05-10-002-03-321
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audit objective. Our objective, scope, methodology, and criteria are detailed in Appendix B.
RESULTS IN BRIEF
The Department did not fully utilize the debarment authority provided in the INA and did not consider other regulatory suspension and debarment authority. Consequently, the Department did not consider debarring 178 FLC individuals or entities with convictions resulting from 42 investigations conducted by the Department’s OIG. When the Department debarred 14 individuals or entities under the INA debarment authority for FLC violations in FY 2009, it did not forward that information for inclusion on the governmentwide exclusion system. Program Office and Wage and Hour officials did not provide information for inclusion on the EPLS because they believed that the governmentwide debarment rules did not apply to FLC programs. As a result, there is an increased risk that parties who have previously violated FLC laws or regulations could continue to receive FLC certifications or new government business or benefits from other federal departments.
A separate issue not related to suspension and debarment came to our attention — the testing of FLC application data revealed 99 applications or .032 percent of the tested applications approved during FY 2009 that contained potentially invalid EINs. An invalid EIN may indicate that the applicant is not a legitimate organization recognized by IRS. While the number of potential invalid EINs is small, to review applications for valid EINs that fell within the IRS acceptable range is within the Program Office’s authority to review for obvious errors and the FLC application processing controls should identify applications with potentially invalid EINs with causing an undue burden.
In response to our draft report, the Assistant Secretary for ETA stated that we had apparently concluded that all convicted individuals should be debarred. However, we only recommended that the Program Office consider and document the appropriateness of debarment. The Assistant Secretary also stated that there are differing legal opinions that need to be resolved concerning the Program Office’s use of the exclusion system. The Assistant Secretary’s complete response is in Appendix D.
In discussing our draft report, WHD officials expressed concern about the legality of using 29 CFR Part 98 to debar FLC applicants and reporting all FLC debarments to the exclusion system. WHD indicated it has initiated legal research to make a final determination.
We recommend the Assistant Secretary for Employment and Training and the Deputy Administrator of the Wage and Hour Division implement procedures and controls to assure that the Program Office and Wage and Hour (a) use suspension when appropriate and assess and document the appropriateness of debarring each individual convicted of an FLC violation resulting from an OIG investigation, and (b) report FLC suspensions and debarments to designated Department personnel for inclusion on the governmentwide exclusion system. We also recommend the Assistant Secretary for
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Employment and Training strengthen FLC application processing controls to ensure the detection and resolution of applications with invalid EINs. RESULTS AND FINDINGS Objective—Was the Department properly using suspension and debarment in administering the foreign labor certification programs?
The Department did not consider debarment actions against convicted FLC violators, and did not report debarred or disqualified parties to the government’s exclusion system. The Department was not required to use suspension and was not properly using debarment in administering the foreign labor certification programs. Specifically, it did not (a) consider debarring 178 FLC applicants2based on the results of OIG investigations, and (b) report debarred or otherwise disqualified parties for inclusion on the governmentwide exclusion system. The Department’s interpretation of its suspension and debarment authority and responsibilities did not include its authority under the INA to debar individuals convicted of INA violations resulting from OIG investigations, nor did it include the authority granted to all government agencies for debarment related to nonprocurement” activitie.s As a result, (a) parties found to have committed criminal, civil, or administrative violations of FLC rules remained eligible to participate in FLC programs, and (b) other government agencies were not aware of FLC related debarments when evaluating the appropriateness of contracting with or providing government benefits to these parties. Finding 1 — The Department was not cons idering debarment actions against all FLC applicants convicted of FLC violations The Program Office and Wage and Hour only considered debarment actions based on the results of investigative cases that they initiated and based only on INA and the implementing regulations. From May 2008 through September 2009, the Department did not consider debarment action for 178 individuals convicted of violations of FLC programs resulting from investigations initiated by the OIG. This occurred because the Program Office and Wage and Hour narrowly interpreted their debarment authority based on the INA and its implementing regulations (20 Code of Federal Regulations (CFR) Parts 655 and 656). The Program Office and Wage and Hour also did not consider debarment of the 178 individuals under the broader governmentwide nonprocurement suspension and debarment authority granted to federal agencies. As a result, these individuals were neither prohibited from future participation in FLC programs nor were they prohibited from receiving government contracts or benefits from other federal agencies. In addition, in the cases in which the Program Office and Wage and Hour did take debarment actions based on their own investigations, individuals
2a labor contractor, an attorney for the employer or laborFLC applicants may include an employer, contractor, or any other agent of the employer or labor contractor. Suspension and Debarment in Foreign Labor Certification 4 Report No. 05-10-002-03-321
U. S. Department of Labor – Office of Inspector General
debarred from participation in one FLC program were not prohibited from future participation in other FLC programs.
Violations of the INA, including convictions of fraud related to applications for the four types of employment visas (PERM, H1B, H2A and H2B), serve as the basis for debarments by the Program Office and Wage and Hour under the INA, whether the investigations are conducted by those offices or by the OIG. However, the INA debarment authority does not always result in debarment in all the visa programs. As a result, an individual debarred from filing a visa application in one program may not be prohibited from filing an application in another visa programs.
In addition to debarment authority in the INA itself, the debarment and suspension authority under the Department’s governmentwide nonprocurement debarment and suspension regulations at 29 CFR Part 98 (Part 98) is also available to the Program Office and Wage and Hour. These regulations state that all nonprocurement transactions are covered transactions (i.e., covered by the debarment and suspension regulations) unless specifically excluded in the regulations. The regulations define nonprocurement transactions as “any transaction, regardless of type (except procurement contracts).” The regulations further state that a nonprocurement transaction “does not require the transfer of Federal funds.” In addition, the regulations list which transactions are “not covered”transactions and the FLC programs are not included in the list. Therefore, the FLC programs meet the definition of covered transactions under the Part 98 regulations. An expanded version of these regulations is provided in Exhibit 1. Under 29 CFR §98.8003debar entities for a broad range of, the Department could actions including conviction of a crime or a civil judgment. Convictions based on the results of OLRFI investigations, as well as convictions or findings of INA violations resulting from investigations by the Program Office or Wage and Hour, would be included in these causes for debarment. A “debarring official” is defined in 29 CFR §98.935 as
… either (1) The agency head; or (2) An official designated by the agency head.
Through Secretary Orders 03-2009 and 09-2009 the Secretary of Labor had delegated authority as debarring officials to the Assistant Secretary of ETA for the PERM, H2A and H2B programs; and to the Administrator of Wage and Hour, for the H1B program. Under 20 CFR 655.182(g), Wage and Hour has concurrent debarment authority with the Program Office for debarments for the H2A program.
Although OLRFI personnel provided the Program Office with information on 178 FLC related convictions from May 2008 through September 2009, the Program Office did not initiate debarment actions against any of these individuals because (a) it did not believe
3§180.800, which are the OMB Guidelines to29 CFR §98.800 uses the same language as 2 CFR Agencies on Governmentwide Suspension and Debarment (Nonprocurement). Suspension and Debarment in Foreign Labor Certification 5 Report No. 05-10-002-03-321
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it had authority under the INA to take debarment actions based on convictions obtained from OIG investigations and (b) it did not consider the debarment authority given to all FLC programs under 29 CFR Part 98. Both the Program Office and Wage and Hour only considered the debarment authority granted under INA and the implementing regulations, 20 CFR Parts 655 and 656, and believed this authority only applied to investigations that they conducted. As a result, applicants convicted of violating FLC rules would not have been prevented from receiving FLC certifications or new government business or benefits from other federal agencies. The Department can best protect the interest of the U.S. workforce and preserve the integrity of the FLC programs by fully utilizing the authorities under the INA and 29 CFR Part 98 to debar applicants convicted of violations. Finding 2 — The Department did not submit information on debarred or otherwise disqualified FLC applicants to designated Department personnel for inclusion on the governmentwide exclusion system. The Department did not enter information into the government’s exclusion system operated by the General Services Administration in 26 cases (14 in FY 2009) in which the Program Office or Wage and Hour did debar or disqualify a party because of a violation of FLC rules. The Program Office and Wage and Hour officials told us that the criteria for governmentwide debarment were not applicable to FLC program debarments. As a result, the potential existed that another federal agency could inappropriately award a federal contract or other benefit to a debarred FLC applicant because it was unaware of the Department’s debarment. The governmentwide exclusion system was created as the result of Executive Order 12549 (February 18, 1986) which stated that to the extent permitted by law, Executive departments and agencies will: ... participate in a system for debarment and suspension from programs and activities involving Federal financial and nonfinancial assistance and benefits. Debarment or suspension of a participant in a program by one agency shall have governmentwide effect. [Sec 1(a)].
and Send to the [General Services Administration] identifying information concerning debarred and suspended participants in affected programs, participants who have agreed to exclusion from participation, and participants declared ineligible under applicable law….[Sec 2(b)] Subsequently, Executive Order 12689 (August 16, 1989) stated: … in order to protect the interest of the Federal Government, to deal only with responsible persons, and to insure proper management and integrity in Federal activities….
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